The King Abdullah City for Atomic and Renewable Energy ("K.A.CARE") was established via a Saudi Royal Order in April 2010 with the mandate principally to transition the fuel mix that powers Saudi Arabian energy generation toward a far greater use of renewable resources.
K.A.CARE set a goal of generating a total of 54 gigawatts ("GW") of energy from renewable resources by 2032, almost 80 percent of which is designated to come from solar power, with the remainder coming from a mix of wind, geothermal, and waste-to-energy resources. The aim is to reach around 5.1 GW by 2018 and 23.9 GW by 2020.
This program not only portends what will be one of the world's largest and most comprehensive alternative energy undertakings, but its ambitious scope also offers the promise of developing another major industrial sector for the economy of the Kingdom of Saudi Arabia.
In February, K.A.CARE released a white paper detailing the establishment of a competitive procurement program to attract to Saudi Arabia the best renewable energy methods and designs. Officially called the "Competitive Procurement Process," CPP was designed to reflect the K.A.CARE charter in the pursuit of a "sustainable energy mix that emphasizes education, research, global collaboration, local integration, commercialization and social benefit." The white paper invited public comment from prospective bidders into the CPP until April 5. The two stated objectives of the CPP are: "(i) to kick-start the Kingdom's renewable energy sector and (ii) to validate the existing globally benchmarked prices across multiple technologies while applying these prices to the local market context."
According to the white paper, the initial phase of the CPP will be conducted over the next two to three years and will consist of an introductory round, as well as first and second procurement rounds. The three rounds are designed to target up to seven GW of project capacity. In the introductory round, K.A.Care is targeting procurement of 500 to 800 megawatts ("MW") of renewable energy capacity. The white paper explains that this round will consist of five to seven projects of "varying technologies at pre-packaged sites offered to bidders at locations that can be easily connected to the grid."
The white paper also provides that the subsequent two rounds projected for the next two to three years will seek to procure two to three GW of capacity, and three to four GW of capacity, respectively. Although their timing will be determined based upon the length of the preceding rounds, it is expected that a single round will last between six and 10 months. According to the white paper, "[a]fter the nine to twelve month process culminating in the selection of the winners of the Introductory Round, the first full-scale procurement round shall be initiated." The timing of subsequent rounds is expected to be announced as the CPP program proceeds.
The white paper specifies that each round will follow a similar pattern, consisting of a Request for Qualifications ("RFQ") from prospective bidders followed by a Request for Proposal ("RFP") that will go out to qualified bidders. Before issuing the initial RFQ under the CPP, K.A.CARE anticipates distributing a draft RFP and draft power purchase agreement ("PPA") to bidders who have registered for the CPP on the K.A.CARE web site. In addition, K.A.CARE proposes having a series of technical workshops for bidders in order to hear comments on the draft RFP and draft PPA prior to issuing the first RFQ (which will be combined with an Expression of Interest and Statement of Qualifications from bidders).
Overall, projects are expected to be evaluated on such factors as their financial strength, project development status, and degree of local content. Tellingly, the white paper provides that "[p]roponents that integrate local content into their projects will benefit from strong incentives through the rated criteria evaluation for utilizing labor and equipment that provide a positive net benefit to the local economy." An integral part of Saudi Arabia's solar plans, detailed in the white paper, is to establish a solar technology hub in the country and ensure local companies play a major role in the country's burgeoning solar industry.
K.A.CARE expects to have 1.1 GW and 1.3 GW of photovoltaic solar power systems installed under the first and second procurement rounds. Overall, the CPP program is targeting 16 GW of photovoltaic and 25 GW of solar thermal by 2032, although it is possible that mix will change. Solar thermal systems that are bid into the introductory round must include at least four hours of storage capability.
On balance, the K.A.CARE program and the CPP appear to present excellent opportunities to international solar companies across all parts of the solar power value chain to partner with local Saudi solar developers, both to realize an incredible plan for the expansion of solar power and to help the Kingdom of Saudi Arabia build an industrial economic base to complement its oil and gas industry.